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Can I offer equity to investors without violating securities laws in Colorado? What are the requirements?

To offer equity to investors in Colorado without violating securities laws, you can consider the Colorado Crowdfunding Act [1.1]. The act provides an exemption from state securities registration requirements for intrastate offerings of securities made in compliance with the act’s requirements.

To qualify for the exemption, the issuer of the security must be a business entity organized pursuant to the laws of Colorado and authorized to do business in Colorado. The investor must be a Colorado resident or an entity formed pursuant to Colorado laws. The issuer must intend to use and use at least eighty percent of the proceeds of the sale of securities in Colorado.

The sum of all cash and other consideration to be received for all sales of the security pursuant to the exemption provided by this section must not exceed one million dollars during any twelve-month period. The aggregate amount sold to any purchaser during the twelve-month period preceding the date of the sale must not exceed five thousand dollars unless the purchaser is an accredited investor as defined by the securities and exchange commission’s rule 501 of Regulation D, 17 CFR 230.501.

The issuer must make a notice filing with the securities commissioner on a form prescribed by the securities commissioner, including a consent to service of process, pay the fee established by the securities commissioner, provide the securities commissioner with a copy of the disclosure document to be provided to prospective purchasers, provide the securities commissioner with a copy of an escrow agreement, and maintain all records with respect to any offering conducted pursuant to the exemption provided by this section as the securities commissioner may by rule require.

The issuer must provide a disclosure document to each prospective purchaser at the time the offer of securities is made to the prospective purchaser that contains the information that the securities commissioner requires by rule. The issuer may make an offering pursuant to the exemption provided by this section through a broker-dealer that is licensed pursuant to part 4 of this article with its principal place of business in Colorado, a sales representative that is licensed pursuant to part 4 of this article, or an online intermediary that meets the requirements of paragraph (c) of this subsection (3) [1.1].

Please note that the Colorado Securities Act requires registration of securities unless they are exempted under section 11-51-307, 11-51-308, 11-51-308.5, or 11-51-309, or the security is a federal covered security for which a notice filing has been made pursuant to section 11-51-304.5 [1.2].

The securities commissioner may deny or revoke the exemption specified in section 11-51-307 (1)(g) with respect to a specific security or transaction if the securities commissioner finds that such order is necessary in the public interest and for the protection of investors [1.3].

Please consult the full text of the act and seek legal advice to ensure compliance with all applicable laws and regulations.

Source(s):
Jurisdiction

Colorado